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On March 2nd I was with friends of Kisstixx founders Dallas and Mike for the big reveal of their appearance on Shark Tank on ABC TV. 300+ showed up for the party complete with refreshment, even gummy sharks, beach gear, and a kissing photo booth–volunteers only. I got to know Mike and Dallas when providing startup and public relations advice while they were part of the CEDO business incubator where I served on the board.

The party moved into the UCCU arena to view Shark Tank on the big screen. Applause erupted as the young aspiring Kisstixx founders faces appeared and the investor feeding frenzy started. It was a little strange having Mike and Dallas just below me and seeing them on TV. The crowd oooh’d & aaaah’d with each twist of the story. When 2 investors tested the product with a kiss, the crowd went wild.

Of the 5 investors, Mark Cuban, the showman owner of the Dallas Mavericks, made the only offer. He offered the $200,000 requested but demanded 40% of the company. Mike and Dallas seemed to catch their breathe and slightly recoil from the doubling of the 20% ownership they had offered. However, what made Mark’s offer compelling was that he offered to finance inventory, a huge benefit for a company needing large stockpiles of product to scale.

So, did they make the right decision accepting Cuban’s offer? My students in the UVU Entrepreneur class I teach each Saturday debated back and forth. Was 40% too much? That was one of my first questions and at least one class member thought that 30% would have been his limit.

Most of the class, and our very special guest from Mexico via Skype, Paul Ahlstrom, agreed the benefits outweighed the downside. Paul, along with Nathan Furr, wrote the rising standard for successful start-ups, Nail It Then Scale It.

Paul Ahlstrom Skypes with UVU entrepreneur class

Admittedly we discussed this case without several facts like current cash “burn rate.” However, having consulted with Mike and Dallas during their stay in our Orem CEDO business incubator, I know this is definitely a “lean launch.”

Here are some of benefits to Kisstixx for the Cuban alliance:

Rock Star- Kisstixx gets a mega star to promote their stuff

Doors open – Doors that were closed will now open with Cuban’s endorsement

Counsel – Cuban is a terrific businessman. Dallas says he is very involved now with Kisstixx, one on one

Time – This may be the biggest of all. There are some 800 pound guerrillas doing lip balm. Kisstixx has chosen to protect their stuff using “trade secret” rather than “patent.” This means they have to be fast to dominate. Especially if they are the next “pet rock,” as Paul states, not having seen the deep bench of follow on Kisstixx products, then time is precious. Cuban gets them on the shelf fast.

Inventory – Kisstixx will now get some big orders, exponentially larger than previously entertained. That means inventory and I thought I heard Cuban say he will finance it as part of his skin the game. That’s huge!

As founder of PilmerPR, John Pilmer, APR serves as a PR and marketing communications advisor for both emerging and established companies. He offers customers more than 20 years of results-driven business PR and marketing experience. John and the firm have provided PR consultation and campaigns for clients such as Mozy, Novell, AdvancedMD, Certiport, NextPage, ElectraTherm, Altiris, Avamar, EmergeCore Networks, FSLogic, INVISUS, 10x Marketing, MWI, Project Insight, REIC, Seastone, US Synthetic and Funding Universe (now Lendio), among others.

Comments

Congrats to the team at Kisstixx. Cool ideas and should really take off now that Mark Cuban is onboard. Glad to see that Paul Ahlstrom was able chime in. I have read his book, “Nail It Then Scale It” and like how the Kisstixx team is follow the lean startup model he outlined. Highly recommended reading if your launching a startup. http://www.nailthenscale.com/entrepreneur-guide/

Absolutely it was the right deal. Si many people go on the show and get all hung up on giving up a little more % when in reality they probably will be making Way more $ due to the volume they will open up by the directions and contacts the sharks have.

I love Shark Tank, it’s a great reasource for entrepreneurs! I’ve had a few business ideas myself but am never sure if they’re good enough to “make” it. I recently read a book titled “HOT or NOT: How to Know if Your Business Idea Will Fly or Fail”, and it helped me pin point the areas of weakness in my idea so I could work on them before trying to find investors. If any of you other aspiring entrepreneurs out there would like some help, I’d definitely recommend checking this book out! http://www.amazon.ca/Hot-Prof-Sean-Evan-Wise/dp/1468024493/ref=sr_1_1?ie=UTF8&qid=1330874015&sr=8-1

The 40% equity position agreed to with Mark Cuban, in my opinion, is acceptable due to the fact the founders were requesting funding from the “Sharks”. With this type of audience you will end giving up more for your funding than at a financial institution. In the long, they will come out ahead financially with the endorsements of Mark Cuban along with his expertise in business. Hell he owns the Dallas Mavericks.